Colombia’s strong growth has meant burgeoning opportunity for real estate investment, José Vélez, CEO of Grupo Argos, told LatinFinance. But there is still room for changes that will allow for a more mature property sector, he says, and the country should look to other LatAm markets, like Brazil and Mexico, which offer useful models.
“Real estate is a tremendous opportunity,” Vélez said. “Colombia is underdeveloped in terms of how to manage the real estate business.”
Looking at the US and Mexico, he identifies the need for a REIT or Fibra real estate type of fund structure. The legislation in Colombia does not exist for these structures in the same way as in other countries, though there are funds such as Patrimonio Estrategias Inmobiliarias.
"We need to develop something like the REITs in Colombia,” Vélez said. “It is a very interesting vehicle for investment. It is an important structure and part of the development of the real estate markets."
Argos is not immediately interested in planning a fund itself, though it might be a useful option down the road. Vélez said it is something that real estate companies should work together on to lobby the government.
Following the corporate reorganization that separated the Cementos Argos subsidiary, Grupo Argos is now free to focus on real estate. It is active in malls, shopping centers, office buildings, distribution centers and industrial plants.
Malls offer a particularly attractive opportunity, mostly owed to a conspicuous lack of specialist managers in the mold of Brazil's BR Malls. Vélez said Argos plans move into mall management itself. It would contract out the malls’ construction – an area Argos is not interested given competitors might be clients of Cementos.
Large-scale land development – laying out a master plans for multi-use development, including roads, water and power – is another area the company would like to target. Again, Brazil offers an example here. Vélez offers Gafisa as a model of a successful master planning brand.
For now, the real estate growth is fuelled by the $400 million raised in last year's preferred share equity sale, but “this is growing fast and we will need to raise more capital”, Vélez said.
Argos’ Compas port operation business, a partnership with Spain’s Ership and the Echavarria Obregón family, will require Argos to invest $200 million in capex in the next few years. Initially, Vélez said Argos might use bank debt.
“We can raise debt in the Colombian market, and raise equity from the current shareholders. To grow maybe we will go to the international markets in the future,” he said. LF